The North Sea oil and gas sector is facing a “bleak” future with confidence among contractors now at 'record' lows, a survey suggests.

A sector survey conducted by Aberdeen & Grampian Chamber of Commerce and law firm Bond Dickinson, which approached 700 operator, contractor and service companies, of which 133 responded, found 67 per cent of operators have cancelled projects due to low oil prices.

The survey suggests exploration has been one of the hardest hit industries in the sector, with 70 per cent of respondents involved in the sector reporting the value of exploration projects fall in the past 12 months with just eight per cent reporting an increase.

The findings, from the 22nd Oil and Gas Survey, reveal that half of operators - 50 per cent - have been forced to reduce staff training for the same reason.

However decommissioning activity has grown, with “over 80 per cent” of contractors working in that industry reporting an increase in activity in the last 12 months and 24 per cent reporting they expect the value of decommissioning work will fall in the next 12 months.

The fall in oil price has c9ontributed to a fall in confidence and activity levels in the sector, the survey suggests, with contractors' confidence in the UK Continental Shelf (UKCS) at its lowest point since the survey began in 2004.

The survey found just seven per cent of the contractors it surveyed were more confident than a year ago, compared to 76 per cent who are less confident.

However, the Oil and Gas Survey does not break down the number of firms who answered the survey from each specific sector within the wider oil and gas industry.

The survey suggests the number of oil and gas firms working at “optimum levels” in the UKCS has also fallen to its lowest level since 2004, with 21 per cent working at or above optimum levels, down from 47 per cent in the previous survey.

Firms are also reporting a slowdown in overseas markets, with 52 per cent reporting they are working at or above optimum levels, down from 72 per cent in the previous survey.

James Bream, research and policy director at Aberdeen & Grampian Chamber of Commerce, said: “Once again we have a set of results that give us clear signals that new opportunities exist and tells us that actually - contrary to what people say - we haven’t been here before.

“Confidence levels are at an all-time low and we are now experiencing our first ‘recession of confidence’, and it looks gloomy in the year ahead too.

“However, we have seen positive tax changes, the OGA [Oil and Gas Authority] team is bedding in and in the Queen’s Speech the new UK Government has committed to legislating for the Infrastructure Bill.

“There is lots to build on and just perhaps it is possible that we are seeing the start of the next phase in our role at the frontier of the oil & gas sector.”

Uisdean Vass, oil and gas partner at Bond Dickinson, added: “Decommissioning is the bittersweet positive in the survey.

“Academics have been predicting an imminent spike in decommissioning for years but that spike is now well and truly upon us.

“Decommissioning is not driven by oil price or demand and could be very important in maintaining the value of activity in the North Sea – but the inevitable downside is that it hastens the decline of offshore exploration and production.”